Managing Partner and Founder,
What do you get when you marry a wealth of iShares experience with entrepreneurial drive? An independent discretionary fund management business built on ETFs
Having spearheaded BlackRock's iShares' investment research initiative in Europe, Allan Lane decided the time had come to break away and set up shop building an independent exchange traded fund investment business.
But what propels an established executive, who spent four years at iShares and prior to that was part of the Barclays Global Investors team, to up roots and leave?
Perhaps a vision that ETFs were the future and investors from all walks of life would eventually be led to them.
Lane consequently founded Twenty20 Investments alongside Irene Bauer, the firm's chief investment officer, and Mike Kleyn, principal consultant—both ex-BlackRock. Their aim was simple: to launch an independent discretionary fund management firm using ETFs to build portfolios for wealth managers, financial planners and institutional investors.
It is just one of a handful of firms offering this service, and since inception, has grown to assets under management of $37 (£23) million (which includes funds the firm advises on, such as Beauregard Capital).
What has the firm done that has made it successful?
In part, being 100 percent ETF focused is what breaks the mould and helps differentiate the firm from its peers.
"Even now a lot of the investment management community in the UK and Europe, are in denial of what lies ahead. In the U.S. ETF take-up is split 50 percent retail and 50 percent institutional. In the UK and Europe it is 10 percent retail and 90 percent institutional.
"One way or another, new money will arrive, albeit via a younger demographic or from an ever -growing audience who will switch out of their active products due to poor performance accompanied by high fees. It is not if this will happen, but when this will happen," Lane says.
One of the firm's first moves on launching was to trademark its portfolio brand name: the iBasket. This is, in short, a basket full of ETFs. The firm's Balanced Real Return iBasket has a one-year track record with returns of 9.4 percent.
It has also recently launched a Country Rotation iBasket with Societe Generale and runs Bespoke iBaskets for investors who know what they want.
The approach that Twenty20 takes to investing is systematic and research driven, not the star manager approach. It also runs an open architecture policy, which means that it is not tied to a single provider, meaning that the firm can use a range of different ETFs.
"Chasing returns is understandable, but often leads to disappointment. The macroeconomy, and the inevitable investment cycles that come with it are a hallmark of the way the world really works.
"It means that investors should remember the idiosyncratic factors such as wars, political inference in the markets and the not so invisible hand of regulation, and is why we should accept why investing will be forever unpredictable. In the end though, this is where skill is required and results in that rare quantity called alpha," Lane noted. The firm considers itself to take an actively managed approach to passive ETF portfolios. The portfolios are graded into different risk categories, which include cautious, balanced, growth and adventurous.
"There are 5,400 ETFs globally, but choosing from that many is difficult. We perform our own cluster analysis, which breaks the ETFs into groups and we then whittle this down to 200 ETFs, putting these into subcategories based on a scoring system and risk. Once the portfolios are up and running, they are then rebalanced monthly.
"In terms of cost, we do like lower TERs, but at the core, everyone is competing on price, and credibility in the asset class is something we deem more important," said Lane. "We are then left with a list of ETFs from which we can build portfolios based on the investor's theme."